While Vancouver has held the title for some time when it comes to luxury real estate sales, a new report from Sotheby’s International suggests the tables are starting to turn.
In its Mid-Year Top-Tier Report, Sotheby’s looked at real estate activity across the country for those in the $1 million market.
It found that the Vancouver $1 million-plus market experienced a “dramatic slowdown” in the first half of 2018, with $1 million-plus sales down 36% year-over-year to 885 homes sold and sales over $4 million down 55% to 86 homes sold.
“In face of the Government of BC’s February 2018 implementation of a 30-point plan for housing affordability… the $1 million plus single-family home market saw a significant pullback in activity, while the condominium and attached home markets remained resilient,” the report said.
Overall, residential real estate sales over $1 million decreased 19% year-over-year to 1,939 units in the first six months of the year, and $4 million-plus sales decreased 47% to 111 units as consumer confidence and market engagement waned.
The most dramatic slowdown was in the single-family home market, which entrenched into buyers’ territory as sales over $1 million and $4 million fell 36% to 885 homes sold, and 55% to 86 homes, respectively.
“As a result, price reductions and re-listings below original asking prices have become common practices, while once endemic bidding wars have largely evaporated,” said Sotheby’s.
Relative to the single-family and attached-home markets, the $1 million-plus condominium market exhibited strength in the first half of 2018.
Following the 27% year-over-year surge in $1 million-plus condominium sales to record highs in 2017, year-over-year gains were muted in the first half of 2018. While the $1 million-plus condominium market remains the most active segment of the market, there was a 9% year-over-year increase in activity in the first six months of 2018 to 708 units sold, compared to 648 sold in the same time period last year.
The $1–2 million segment of the market saw a year-over-year increase of 17% with 603 homes sold. The $2–4 million segment of the market saw a dramatic decrease in sales volume, with a 30% dip in sales to 82 condominiums sold.
In contrast to 2017, Vancouver’s $4 million-plus condo market exhibited strong gains in the first six months of the year with 23 units selling, a 35% year-over-year increase in sales.
Following a modest 11% increase in $1 million-plus sales volume in 2017 over 2016, the City of Calgary’s top-tier market experienced a regression in the first six months of 2018.
The reversion was largely attributed to rising interest rates and the introduction of stricter federal mortgage rules that constrained the borrowing capacity of home buyers, which stalled progress in a city still recovering from a severe economic downturn.
A delayed start to the spring market due to prolonged winter weather conditions also played a role.
The slowdown was experienced across the conventional and top-tier markets, and across all housing types, with the high-end condominium segment facing the most acute challenges.
Overall sales of $1 million-plus residential real estate (condominiums, attached and single-family homes) decreased 11% in the first six months of 2018, with 350 units sold compared to 395 units sold in the first six months of 2017.
The $1 million-plus market for single-family homes, which comprises the majority of Calgary’s top-tier housing sales, experienced a 13% decline with 304 homes sold in the first six months of 2018, compared to 351 homes in the first half of 2017.
Healthy consumer demand, confidence, and market activity were restored in the Greater Toronto Area (GTA) top-tier real estate market in the first half of 2018 following a “temporary lull” after the April 2017 implementation of the Ontario Fair Housing Plan, the report said.
While recovery was “tentative” in areas outside the city, there were “clear signals” that the market for homes priced over $1 million has been experiencing a renaissance, particularly within the city.
“Stricter mortgage lending rules and rising interest rates disproportionately affected the market for real estate under or in the range of $1 million in the first half of 2018, reducing purchasing power, and redirecting many homebuyers into the condo market,” said Sotheby’s.
However, the impact was less significant in the $2 million-plus market, where buyers were better positioned to absorb the increased costs.
“Given drastic, annual, historically unprecedented gains in the GTA’s $1 million-plus real estate market from 2015 to 2017, year-over-year comparisons of 2018 to 2017 mask the market resurgence underway as consumer and industry confidence renews,” the report said.
Following healthy market momentum in 2017 that drove $1 million- plus sales volume up 20% compared to 2016, top-tier sales activity in Montreal continued at a “strong tempo” in the first half of 2018, hitting record levels and outpacing gains in competing major
“To date, market gains have been unhampered by rising interest rates and new mortgage rules from Canada’s federal financial regulator that came into effect on January 1, 2018,” the report said. “Montreal has also been sheltered from provincial and municipal interventionist cooling policies aimed at addressing affordability that have moderated sales in cities such as Toronto and Vancouver.”
However, Sotheby’s said there are “hints” that gains in the $1 million-plus market will level off in the third quarter of 2018.
Overall, real estate sales over $1 million (condominiums, attached, and single-family homes) experienced a 24% year-over-year increase in the first half of 2018, totalling 460 sales compared to 372 properties sold during the same period in 2017.